Iraq's protests raise a question: Where does the oil money go?

BAGHDAD: Waves of violent protests have enveloped Baghdad and Iraq in the southern provinces, with protesters singing for the fall of a political establishment that they say doesn't give them priority.

Feeding the riots is anger over an economy full of oil money that has failed to generate jobs or improvements in the lives of young people, who are the majority of those who go out. They say they have had enough of the blatant government corruption and poor basic services.

At least 320 people have died and thousands have been injured since the riots began on October 1.

"We are jobless and poor, but every day we see the flares of the oil fields," said Huda, an activist in Basra, the province that accounts for the lion's share of Iraq 's crude exports. She spoke on condition she be identified only by her first name for security reasons.

Where do the millions go? she asked.

It's a good question. Oil accounts for roughly 85-90% of state revenue. This year's federal budget anticipated $79 billion in oil money based on projected exports of 3.88 million barrels per day at a price of $56 a barrel. Iraq 's economy improved in 2019 due to rising in oil production, and GDP growth is expected to grow by 4.6% by the end of the year, according to the World Bank.

The fruits of these riches are rarely seen by the average Iraq i because of financial mismanagement, bureaucratic inefficiency and corruption, experts and officials told The Associated Press. Overall unemployment is around 11% while 22% of the population lives in poverty, according to World Bank estimates. A striking one-third of Iraq i youth are without jobs.

One of the main problems is that oil wealth is spent in the public sector, and especially in wages, said Ali al-Mawlawi, head of research at the al-Bayan Center, a group of experts based in Baghdad.

Iraq 's brand of sectarian power-sharing -- called the "muhasasa" system in Arabic -- effectively empowers political elites to govern based on consensus and informal agreements, marginalizing the role of parliament and alienating much of the Iraq i population in the process.

On the ground, this dynamic has been developed through a quota system through which resources are shared among political leaders, and each of them competes to increase patronage networks and generate support. To do this, leaders have relied on distributing government work as an infallible method of preserving loyalty.

This tactic has bloated the public sector and drained Iraq 's oil-financed budget, leaving little for investment in badly needed social and infrastructure projects.

That has been the approach, al-Mawlawi said. Sponsorship is based primarily on the provision of jobs rather than anything else. It is the main way to distribute resources, through the public sector. In the 2019 budget, public sector compensation accounted for almost 40% of state spending.

Iraq 's public sector grew in parallel with the development of the country's oil industry following the 2003 US-led invasion that toppled dictator Saddam Hussein. With major international oil companies flocking to develop the country's oil fields, the number of government employees grew three-fold in the last 16 years, according to Mawlawi's research.

Offering jobs is also a recourse used by Iraq i politicians to quell protests in the past. Prime Minister Adil Abdul-Mahdi included thousands of hires in a reform package introduced last month. Experts said this approach only perpetuates the problem.

The trend is not unique to Iraq ; oil-rich Gulf countries have experienced the same. But the oil sector's inextricable link to Iraq 's muhasasa system has created a "Frankenstein version" of a typical phenomenon, said Ahmed Tabaqchali, a senior fellow at the Sulaymaniyah-based Institute of Regional and International Studies and Chief Investment Officer at Asia Frontier Capital Iraq Fund.

Due to the multiple decentralized muhasasa networks, instead of having a single authoritarian take care of the hiring, we have many hiring as with steroids, Tabaqchali said.

Tracking money on how ministries spend their budgets is difficult even for well-intentioned reformers because there is little transparency and accountability.

The national budget has allocated increasing amounts each year for goods and services, which can vary from public service projects to worldly expenses such as the maintenance of a ministerial building. But many complain that little progress can be seen on the ground.

In some cases, the money is simply not spent due to poor planning and management, al-Mawlawi said.

Last year's budget ended with a surplus of around $ 21 billion not because we had too much money, but because we didn't know how to spend it the right way, he said.

Often, money earmarked for service projects by the government or international organizations gets spent by ministry officials for expenditures, said an Iraq i official, who requested anonymity because of regulations. Officials lump all the budgets together for spending and then "they always prioritize petty things and claim the money isn't enough for the project," the official said.

Or the funds are used to pay off the accumulated debts of previous years, the official said. So when the time comes to sign the contract, they say 'there is no money' because what they have is not enough.

There are thousands of ways bureaucrats can divert it, the official added.

Crucial projects, meanwhile, remain incomplete.

School buildings in Basra, the province that accounts for the bulk of oil exports, are falling apart and crammed with multi-shift programs.

On a recent visit to Al-Akrameen School in the neighborhood of Abu Khaseeb, Principal Abdulhussain Abdul Khudher said he had requested funds from the Directorate of Education to restore the school building built in 1972, but was told there was no money.

I trust parents and volunteers to give furniture, keep the place clean for students so they can get an education, he said.

Nearby, another school was desolate. A girl passed by and explained that it was empty and that the students had been transferred to another pre-existing school. It will collapse at any moment, he said.

Iraq i leaders have been unwilling so far to reform the system, which experts said is unsustainable because of limited resources and overreliance on volatile oil markets.

Serious attempts were made after the financial crisis of 2015, when the government of former Prime Minister Haidar al-Abadi introduced unpopular austerity measures. But when oil prices recovered, political pressure exceeded strict spending measures.

The Abdul-Mahdi government experienced a 25% increase in spending compared to previous years.

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